Feb 24, 2016

Law converges on Short Creek; arrests made on conspiracy, money laundering indictment

Joyce Kuzmanic
St George News
February 23, 2016

Hildale, Utah, and Colorado City, Arizona
HILDALE – Local, state and federal law enforcement converged upon the twin cities of Hildale, Utah, and Colorado City, Arizona, Tuesday in actions related to a two-count indictment unsealed in U.S. District Court, District of Utah, Tuesday afternoon.

The cities, traditionally known as Short Creek, are residence to members of the Fundamentalist Church of Jesus Christ of Latter Day Saints. The indictment charges 11 leaders and members of the FLDS sect with conspiracy to commit “Supplemental Nutrition Assistance Program” or SNAP benefits fraud and conspiracy to commit money laundering.

The indictment alleges church leaders diverted SNAP proceeds from authorized beneficiaries to leaders of the FLDS church for use by ineligible beneficiaries and for unapproved purposes.

A large percentage of FLDS church members living in Short Creek receive SNAP benefits amounting to millions of dollars in benefits annually, according to a news release issued by the U.S. Attorney’s Office Tuesday.

The indictment names leaders and members of the FLDS church including: Lyle Steed Jeffs, 56, John Clifton Wayman, 56, Kimball Dee Barlow, 51, Winford Johnson Barlow, 50, Rulon Mormon Barlow, 45, Ruth Peine Barlow, 41, and Preston Yates Barlow, 41, all of Hildale; Seth Steed Jeffs, 42, of Custer, South Dakota; and Nephi Steed Allred, age not specified, Hyrum Bygnal Dutson, 55, and Kristal Meldrum Dutson, 55, all of Colorado City, Arizona.

Lyle Jeffs is the brother of FLDS leader Warren Jeffs, who is now serving a life-plus-20-years sentence in a Texas prison after being convicted in 2011 of felony sexual assault and aggravated sexual assault of children charges.

In the physical absence of Warren Jeffs, Lyle Jeffs handles the daily affairs of the organization, including its financial matters, the news release states. Another of Warren Jeffs’ brothers, Seth Jeffs, leads a congregation of FLDS members in rural Custer County, South Dakota.

“This indictment is not about religion. This indictment is about fraud,” U.S. Attorney John W. Huber said Tuesday. “This indictment charges a sophisticated group of individuals operating in the Hildale-Colorado City community who conspired to defraud a program intended to help low-income individuals and families purchase food.”

Washington County Sheriff Cory Pulsipher, who helped initiate the investigation and has officers participating on the FBI’s Public Corruption Task Force, emphasized the role his local investigators played in starting the investigation; according to the news release, he said:

What started as a small investigation quickly grew to a point where it was important to work with federal agencies to build a case to present to a grand jury.

Washington County Attorney Brock R. Belnap, whose office also participated in the investigation, will participate in prosecuting the case as a Special Assistant U.S. Attorney.

Arrest warrants were executed Tuesday morning in Salt Lake City, in Short Creek and in Custer County, South Dakota, for all the named defendants. Persons arrested are listed below.

The case is being investigated by the FBI, Washington County Sheriff’s Office, IRS Criminal Investigation, the U.S. Department of Agriculture’s Office of Inspector General and the Washington County Attorney’s Office. The Arizona Department of Economic Security, the Mohave County Sheriff’s Office, the FBI’s Minneapolis and Phoenix Field Offices, and the U.S. Attorney’s Office in South Dakota assisted with the case. In South Dakota, Custer County Sheriff Rick Wheeler also assisted with the investigation and arrests Tuesday.

The Agriculture Department’s Food and Nutrition Service operates the SNAP program to provide assistance to low-income individuals and families to purchase food products. The authority to determine eligibility and to certify individual SNAP recipients who qualify for the program is delegated to individual states. Persons in need of benefits apply with the appropriate state agency. Approved applicants receive an electronic benefits transaction card similar to a bank debit card, that is linked to a SNAP account. EBT cards have a magnetic strip containing recipient information and the benefit amount. When a recipient presents a SNAP EBT card to a retailer to pay for eligible food items, the retailer debits funds from the recipient’s available SNAP benefits. SNAP benefits apply only to the purchase of eligible food items. Recipients cannot exchange their benefits for nonfood items, household goods or cash. Only members of the recipient household may use the program benefits.

The indictment alleges that starting in about 2011, FLDS leaders, including Lyle Jeffs, instituted the “United Order” within the ranks of the church. Participation in the United Order purports to constitute the highest level of worthiness and spiritual preparedness in the church. Devout FLDS members aspire to eligibility in the United Order.

According to the U.S. Attorney’s Office news release, adherents to the United Order must donate all of their material assets to the FLDS Storehouse, a communal clearinghouse charged with collecting and disbursing commodities to the community. The indictment alleges that United Order policy also dictates members must obtain their food and household commodities solely through the FLDS Storehouse.

The indictment further alleges the defendants engage in a variety of overt acts in furtherance of a conspiracy to defraud the SNAP program by diverting SNAP proceeds from authorized beneficiaries to leaders of the FLDS church for use by ineligible beneficiaries and for unapproved purposes.

Church leaders, including Lyle Jeffs, Seth Jeffs, John Wayman and Kimball Barlow, held meetings in which they disseminated storehouse protocols, according to the indictment. These protocols dictated methods for unlawfully diverting SNAP benefits to the FLDS Storehouse as well as instruction on how to avoid suspicion and detection by the government, according to the indictment.

FLDS members transferred their SNAP benefits to FLDS-controlled stores without receiving eligible food products at the time of the transactions. For example, according to the news release, on Oct. 16, 2015, an FLDS member conducted a SNAP transaction for $800 without receiving eligible food products at the time of the transaction. On one occasion, John Wayman collected EBT cards from legitimate beneficiaries, provided the cards to another individual and directed that person to use the SNAP funds to purchase food and goods for noneligible persons.

SNAP fraud proceeds also financed ineligible purposes. For example, the indictment alleges that in March 2015, using SNAP fraud proceeds, Kimball Barlow signed a check for $16,978 to Orchid’s Paper Products Company for the purchase of paper products. During the period May 31, 2013, through September 22, 2014, the indictment alleges Ruth Barlow signed five checks totaling $13,561 made payable to John Deere Financial. The SNAP fraud proceeds were used for installment payments on a 2013 John Deere load tractor. SNAP fraud proceeds were also used for 16 checks totaling $30,236 payable to Ford Motor Credit for installment payments on a 2012 Ford F-350 purchased by Winford Barlow about Sept. 29, 2012.

Money laundering, damages, potential penalties

The money laundering count of the indictment alleges the defendants conspired to conceal and disguise the nature, location, source, ownership and control of proceeds of a specified unlawful activity while conducting or attempting to conduct financial transactions.

The indictment also seeks a money judgment equal to the value of the proceeds traceable to the alleged criminal offenses.

The potential penalty for conspiracy count is five years in prison. The money laundering count carries a potential penalty of 20 years in prison.

Arrests, initial appearances

Lyle Steed Jeffs and John Clifton Wayman were arrested Tuesday morning in Salt Lake City. They are scheduled to make an initial appearance on the charges Wednesday at 10 a.m. in Room 7.1 of the federal courthouse in Salt Lake City.

Seth Steed Jeffs was arrested Tuesday morning in Custer County, South Dakota, and will have an initial appearance in federal court in South Dakota.

Defendants arrested Tuesday in the Short Creek area will appear Wednesday at 10 a.m. in federal court in St. George. As of 7:20 p.m., Ruth Peine Barlow, Winford Johnson Barlow and Kristal Meldrum Dutson have been booked into Purgatory Correctional Facility.

Multi-agency action

Spokesmen for several agencies involved in Tuesday’s action are quoted in the news release.

Eric Barnhart, special agent in charge of the FBI’s Salt Lake City Field Office said:

Today’s indictment is the culmination of the tireless efforts of the FBI Public Corruption Task Force, which includes the IRS-Criminal Investigation, the U.S. Department of Agriculture’s Office of Inspector General, the Washington County Sheriff’s Office and the Washington County Attorney’s Office. The violations included in the indictment are especially egregious since they allege that leaders of the conspiracy directed others to commit crimes, for which only certain people benefited. This type of conduct represents nothing less than pure theft. The FBI and its law enforcement partners will actively pursue those entities or persons who unlawfully manipulate and control government programs for their own gain.

IRS Acting Special Agent in Charge Aimee Schabilion said:

IRS Criminal Investigation uses its financial expertise to unravel complex financial transactions and money laundering schemes designed to conceal the true source of funds. We are committed to working with our federal agency partners in combatting frauds against the government.

Washington County Attorney Brock R. Belnap said:

I am grateful for the numerous partners who have worked diligently on this case. It is our shared hope that this action will help innocent families receive the food assistance that they genuinely need while holding people accountable who conspire to divert those resources to illegal purposes.

Special Agent in Charge Lori Chan, Office of Inspector General of the U.S. Department of Agriculture, Western Region, said:

Protecting the integrity of the Supplemental Nutrition Assistance Program (SNAP) is a major investigative priority for the Office of Inspector General. Vendors who engage in SNAP fraud exploit the program’s needy beneficiaries, and misuse the substantial funding that taxpayers provide. OIG is dedicated to ensuring SNAP funds are used for their intended purpose – feeding individuals and families. We look forward to continuing to work with our law enforcement partners to combat SNAP fraud.

In a press release issued by the Mohave County Sheriff’s Office on Tuesday, Sheriff Jim McCabe said the indictments were the result of many years of work and he was “happy to see it come to full term with the arrest of many people that have been taking advantage of the taxpayers and milking them out of millions of dollars.”

Requests for comment directed to the Washington County Sheriff’s Office were referred to the U.S. Attorney’s Office news release cited in this report.

An indictment is not a finding of guilt. Individuals charged in an indictment are presumed innocent unless or until proven guilty in court.

UPDATED 2:35 p.m. Booking photo for Ruth Peine Barlow added; 5 p.m. booking photos for Kristal Dutson, John Wayman and Lyle Jeffs added. 7:20 p.m. additional booking photos added.


See the charging document, as provided by Mohave County Sheriff’s Office, here: US v Jeffs et al Indictment – unsealed – USDC-Utah-20160223


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